Shares decline on Fed bets after US jobs report

Local shares closed in negative territory on Monday following strong US jobs data, which caused Federal Reserve rate cut expectations to ease, and as investors pocketed profits after the market’s climb earlier in the day.

The benchmark Philippine Stock Exchange index (PSEi) fell by 20.42 points or 0.3% to end at 6,609.22 on Monday, while the broader all shares index decreased by 3.01 points or 0.08% to finish at 3,499.51.

“The market started the week on a cautious tone with persistently thin volume. The negative sentiment was fueled, in part, by a surprising surge in US jobs data, setting off a chain reaction across international markets,” AB Capital Securities, Inc. Vice-President Jovis L. Vistan said in a Viber message.

Value turnover dropped to PHP 4.28 billion on Monday with 412.88 million issues changing hands from the PHP 5.26 billion with 520.19 million shares seen on Friday.

The monthly nonfarm payrolls report showed the US economy added 216,000 new jobs in December, Reuters reported.

The jobless rate held steady at 3.7%, down from most forecasters’ expectations for it to rise, prompting concerns that the Fed’s long battle to tame inflation may have further to run.

“Investors also adopted a prudent approach, opted for a “wait-and-see” strategy in anticipation of the release of the latest US consumer price index figures scheduled for Thursday. It is expected to provide insights into the trajectory of future US interest rate cuts throughout the remainder of the year,” Mr. Vistan said.

“A low inflation figure would reinforce expectations that the Fed will start cutting interest rates,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

The US central bank last month kept the fed funds rate steady at 5.25-5.5% for a third straight meeting after hiking borrowing costs by a cumulative 525 basis points from March 2022 to July 2023.

The Federal Open Market Committee will hold its first policy meeting for the year on Jan. 30-31.

“Philippine shares succumbed to profit taking at the end of session after trading in the green for most of the day,” Mr. Limlingan added.

The majority of sectoral indices declined on Monday. Holding firms dropped by 33.88 points or 0.52% to 6,386.39; financials went down by 8.05 points or 0.45% to 1,766.66; services declined by 7.09 points or 0.43% to 1,641.73; and mining and oil retreated by 40.44 points or 0.41% to 9,736.97.

Meanwhile, industrials rose by 16.14 points or 0.17% to 9,258.45, and property climbed by 5.06 points or 0.17% to 2,879.44.

Advancers edged out decliners, 99 to 93, while 51 names closed unchanged. 

Net foreign buying dropped to PHP 160.66 million on Monday from PHP 420.61 million on Friday.

Mr. Vistan put the PSEi’s immediate support at 6,550 and immediate resistance at 6,700. — RMDO with Reuters